Exclusive-SMBC rules out raising stake in Yes Bank beyond 25%, Yes shares tumble
MUMBAI :Japanese lender Sumitomo Mitsui Banking Corporation has no immediate plans to raise its stake in India's Yes Bank beyond 24.99 per cent, a senior executive at the bank told Reuters on Friday.
Its initial purchase, announced in May, marked the latest major overseas investment by a Japanese financial institution as they look to secure new sources of growth after years of rock bottom interest rates at home.
SMBC is, however, moving cautiously with its biggest investment in India, in contrast with analysts' expectations that it would quickly move to seek approval for a further increase in its stake and launch an open offer.
In his first interview since the deal concluded in September, Rajeev Kannan, group executive officer and head of SMBC Group's India division, said the bank is focused on contributing to Yes Bank's growth as its largest shareholder and board member, and does not intend to take on an executive role in the lender.
"We are not actively looking at increasing our stake in Yes Bank beyond the regulatory permissible limit of 24.99 per cent," Kannan said. "There are many areas which Yes Bank still needs to work on, and we need to ensure that those areas, which they have a plan to address, are being executed."
Kannan said that Yes Bank needs to improve on its cost of funds, return on assets and return on equities as compared to its peers.
The bank's current holding in Yes Bank stands at 24.2 per cent.
Under India's takeover regulations, acquiring 25 per cent or more in a listed company triggers a mandatory open offer to purchase at least an additional 26 per cent from public shareholders, potentially resulting in a majority stake of 51 per cent.
In August, SMBC received Reserve Bank of India's approval to buy up to a 24.99 per cent stake in Yes bank from State Bank of India and seven other shareholders after having inked a deal in May to purchase a 20 per cent stake for $1.6 billion, in the country's largest cross-border financial sector merger and acquisition.
Kannan said that State Bank of India has agreed to stay on a significant shareholder with the current shareholding of 10.8 per cent.
Shares of Yes Bank dropped over 4 per cent to 22.1 rupees after the report. They were trading 0.8 per cent lower before the news. The bank's shares are still up more than 20 per cent since the deal was announced in May this year.
BROADER INDIA PLANS
The group, which has investments worth $7 billion in India, intends to keep its existing non-bank lending business SMFG Credit separate from its investment in Yes Bank.
"We have made a significant investment into the NBFC platform and our intention is to scale it up," Kannan said.
"In future, there is a possibility that things could be more integrated maybe. But we haven't basically focused on that. Our intention is to look at each entity on its own strength at this point in time," he said.
SMFG Credit had assets under management totaling $6.5 billion as of March 31, 2025.
Kannan said the group has not applied to set up a wholly owned subsidiary in India and continues to evaluate the plan.
India's banking regulator encourages but does not mandate foreign banks to set up "wholly-owned" subsidiaries in India by allowing them rights on par with domestic banks.
A wholly-owned subsidiary has capital that is ring-fenced from the parent bank.
SMBC Group also sees opportunities in the wealth management and investment bank businesses in India, through Yes Bank and its securities platform. The group may also consider asset management business as an area of growth in future, given their holding in Sumitomo Mitsui DS Asset Management, added Kannan.
